Exelon's defined-contribution pension plan allows participants to choose how their retirement assets will be invested. It offers 32 options, including 24 mutual funds that are open to the public. These funds are no-load vehicles. In other words, they do not charge investors a fee to buy or sell shares. Purchases and sales occur at net asset value, calculated daily. A no-load fund covers its expenses by deducting them from the assets under management. So if these assets appreciate 10% in a given year, and the expenses come to 1%, investors receive a net gain of 9%; if the assets decline 5% in the market, investors' net return is -6% that year. The funds available to participants in the Exelon Plan have expense ratios ranging from 0.03% to 0.96%. The low-expense funds tend to be passively managed (index funds, for example, which do not make any independent investment choices but simply track a designated portfolio such as the Standard & Poor's 500 Index) and have features that discourage turnover (an index fund typically disallows new investments for a month or more following any withdrawal). The high-expense funds tend to be actively managed (that is, the fund's investment advisers try to find and buy underpriced securities while selling ones that the advisers think are overvalued) and to allow rapid turnover both in the funds' holdings and the participants' investments. Higher turnover means higher brokerage fees and higher administrative expenses.

Plaintiffs, participants in Exelon's Plan, contend that its administrators have violated their fiduciary duties under the Employee Retirement Income Security Act, see

29 U.S.C. §1104(a), in two ways: by offering "retail" mutual funds, in which participants get the same terms (and thus bear the same expenses) as the general public; and by requiring participants to bear the economic incidence of those expenses themselves, rather than having the Plan cover these costs. Plaintiffs contend that Exelon should have arranged for access to "wholesale" or "institutional" investment vehicles. Some mutual funds offer a separate "institutional" class of shares, and Exelon's Plan also could have participated in trusts and investment pools to which the general public does not have access.

Similar arguments were made in Hecker but did not prevail. Deere offered 25 retail mutual funds with expense ratios from 0.07% to just over 1% annually. We held that as a matter of law that was an acceptable array of investment options, observing that "all of these funds were also offered to investors in the general public, and so the expense ratios necessarily were set against the backdrop of market competition. The fact that it is possible that some other funds might have had even lower ratios is beside the point; nothing in ERISA requires every fiduciary to scour the market to find and offer the cheapest possible fund (which might, of course, be plagued by other problems)." 556 F.3d at 586. By offering a wide range of options, Hecker held, Deere's plan complied with ERISA's fiduciary duties.

Plaintiffs contend that the panel in Hecker retreated from this holding when denying a petition for rehearing. It did not. Two principal issues were disputed in Hecker: first, whether ERISA plans must offer "wholesale" or "institutional" funds; second, whether Deere's portfolio of funds was covered by a safe harbor, 29 U.S.C. §1104(c), that made the answer to the first question irrelevant. The opinion denying rehearing principally concerned the second issue. (Exelon does not rely on §1104(c).) The panel reaffirmed its negative answer to the first question, stating that plaintiffs

argued-and especially in their Petition for Re-hearing they continue to argue-that the Plans were flawed because Deere decided to accept 'retail' fees and did not negotiate presumptively lower 'wholesale' fees. The opinion discusses a number of reasons why that particular assertion is not enough, in the context of these Plans, to state a claim, and we adhere to that discussion.

Nothing in Jones v. Harris Associates, L.P., 130 S. Ct. 1418 (2010), undermines Hecker's analysis. The petition for rehearing in Hecker was denied three months after Jones came down. That case dealt with the fiduciary duties of investment advisers, which as the Court observed have a conflict of interest when seeking management fees from mutual funds under their effective control. Plaintiffs do not contend that the funds that Exelon selected had any control over it, or it over them; there is no reason to think that Exelon chose these funds to enrich itself at participants' expense. To the contrary, Exelon had (and has) every reason to use competition in the market for fund management to drive down the expenses charged to participants, because the larger participants' net gains, the better Exelon's pension plan is. That enables Exelon to recruit better workers, or reduce wages and pension contributions without making the total package of compensation (wages plus fringe benefits) less attractive. Competition thus assists both employers and employees, as Hecker observed. (By contrast, the plaintiffs in ...

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